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Social Impact bonds

A recent post on the New York Times website highlights the UK’s experiment with social impact bonds—a new, innovative way of thinking about the financing of social projects and programmes.

In a nutshell, a group called Social Finance has created a financial product that helps connect investors with social service providers. The investors buy social impact bonds that fund a social service provider’s project or programme that is designed to achieve particular measureable outcomes in a set amount of time. If the provider achieves their set outcomes, the UK government will repay the investors a portion of the savings they have made from the success of the project or programme.

The first trial of these social impact bonds is currently taking place in Peterborough. An organisation called One Service has made it their mission to cut down on the recidivism rates of men released from short-term sentences in Peterborough Prison. Social Finance has helped them to find 17 investors to fund their programme via social impact bonds. The better One Service does in lowering recividism rates, the more the government will pay out to these investors from the money the government will save.

The idea of social impact bonds is an intriguing one for tackling difficult social issues. It will be interesting to see how the Peterborough trial goes.

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